Naira At Record Low Against Dollar As Market Reacts To CBN Monetary Policy

The naira today hit a record low of 237 to the dollar on the black market, as the apex ban’s restrictive forex allocation policy has taken its toll on the end users who now storm the parallel market to source required funds, the traders confirmed to the Street Journal.

A trader in Sabo forex market in Ibadan, Abubakar Sadiq said that this is the first time the local currency exchange at this rate against the dollar in the Bureau de Change segment.

He said the sharp drop of the currency was due to the scarcity of the forex in the market and the inability of some importers to source the forex from the banks and the CBN.

In Abuja, investigation revealed that the naira exchanged at 234 to the dollar in early hours trading and later increased to 235.

The traders attributed the sharp drop of the local currency to the new policy by CBN that banned the importers of about 41 items in the country including some major food items like rice, fish and other canned foods.

According to further investigations, trading records, at the interbank market, the naira traded at 199.45 at 1210 GMT on Thursday, near central bank’s pegged rate of 196.95. Investors questioned how long the bank’s rate could hold there, when the currency was trading further and further away on the parallel market.

Ibrahim Muazu, CBN spokesperson said that the official interbank market had the capacity to handle legitimate dollar transactions but that people preferred to use the unofficial parallel market for undocumented transactions.

The central bank has spent around $5 billion since January defending the naira, hit by last year’s plunge in oil prices.

On Wednesday, the central bank said its foreign exchange reserves had started to recover gradually with its management of dollar demand and government’s effort to plug all leakages.

Spot reserves stood at $31.89 billion on July 7, the spokesman said, however central bank’s moving average data showed reserves at $29.63 billion on July 7.

The Street Journal had reported the manufacturers’ disdain for the CBN’s forex restrictions slammed on some items on the import lists of forex end users. Top officials of NACCIMA and MAN had condemned the policy; stressing that it would only lead to cost-push inflation and consumers would be made to pay more for locally manufactured goods due to high cost of production.